WASHINGTON — Plastic resin makers and a coalition of other rail-dependent industries descended March 2 on Capitol Hill to enlist congressional support in blocking another pending rail merger.
The firms fear that a merger of Montreal-based Canadian National Railroad and Fort Worth, Texas-based Burlington Northern Sante Fe Corp. will spur a last wave of consolidation that will leave North America with just two major railroads.
"We have to draw a line in the sand and stop this merger," said Whitson Sadler, president and chief executive officer of Solvay America Inc. and chairman of the executive committee of the Chemical Manufacturers Association.
"If we allow the rest of the mergers to go through, then we will be dead in the water," he said.
Industry officials predict a merger would result in widespread trouble, including significantly higher freight rates and declining service.
The railroad industry, however, argues that inflation-adjusted rates have fallen 55 percent since 1980, when Congress loosened rail regulation. Mergers can help railroads become more efficient and improve service, said Tom White, spokesman for the Association of American Railroads in Washington.
But shippers are not happy.
Sadler spoke at a March 1 forum on rail politics, an event that drew participants from the plastics, chemical, steel, paper, agricultural and electric utility industries. It was followed by a day of lobbying.
Resin makers at the event said they continue to have service problems in the eastern United States, where Norfolk Southern and CSX have not been able to digest their acquisition of Conrail. DuPont said problems remain severe, with two to four days added to transit times on most routes. The company cannot predict how long it will take shipments to arrive, said Joseph Resender, the North American logistics manager for DuPont.
Union Carbide Corp. said conditions are better but not back to normal on Conrail — a point echoed by the Chemical Manufacturers Association.
Some observers at the forum said the CN-BNSF merger is not likely to produce the kind of service disruptions felt at Conrail, or like those experienced when Union Pacific swallowed Southern Pacific three years ago. That's because CN and BNSF have compatible computer systems and are more end-to-end railroads than direct competitors.
But the merger seems likely to prompt the remaining handful of major railroads into another round of buying each other up, a point the railroads have made publicly.
Railroads contend merging boosts profitability. The industry cannot get an adequate return on investment now, and shippers will see service worsen if railroads cannot improve their finances, White said.
But consolidation will hurt, shippers say. A Chemical Manufacturers Association study claimed that chemical shippers captive to one railroad pay 15-60 percent more than when competition exists.
The scope of the rail industry consolidation has been huge: In 1980, the four largest railroads had 43 percent of traffic. By 1998, the four largest had 95 percent, according to Harvey Levine, a transportation economist and former vice president of the Association of American Railroads.
Those four largest control 88 percent of the chemical industry's origination traffic, according to the Alliance for Rail Competition, which organized the forum. The Washington-based Society of the Plastics Industry Inc. and the Arlington, Va.-based American Plastics Council were sponsors.
The shippers support federal legislation that would encourage competition and make it easier for companies in monopoly regions to request alternative rail service.
Within the Clinton administration, the Federal Railroad Administration is floating its own radical proposal: government money to help railroads pay for their infrastructure, similar to federal money to build highways.
On Capitol Hill, the fight will center around legislation to reauthorize the Surface Transportation Board, which regulates U.S. railroads. Shippers want conditions attached, and railroads and congressional leaders favor a clean reauthorization, without conditions.
Railroad industry spokesman White said the clean reauthorization has much more support in Congress, including from Senate leaders, and industries such as automotive and mining do not support what the shippers group is doing.
One adviser to the shippers coalition, former Secretary of Agriculture Robert Bergland, told the group it needs more lobbying work from the chief executive officers of its member companies, if it wants to make headway on Capitol Hill.